A company has current assets of $90,000 and its current ratio is 2.5. Assume that the...
A company has current assets of $90,000 and its current ratio is 2.5. Assume that the company pays off some accounts payable in the amount of $4,000. The current ratio after this transaction is closest to:
A. 2.39
B. 2.69
C. 2.50
D. 2.81
Homework Answers
Current ratio=current assets/Current liabilities
Hence Current liabilities now=(90,000/2.5)=$36,000
Journal would be:
Accounts payable a/c...Dr $4000
To Cash $4000
Hence Current liabilities would reduce and would become=(36000-4000)=$32000
Also current assets would be=(90,000-4000)=$86,000
Hence current ratio would be=86,000/32,000
=2.69(Approx).
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